The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, introduced significant updates to the deductibility of business-related meals and entertainment expenses under Internal Revenue Code (IRC) § 274.
This guide offers a clear breakdown of the rules for deducting business meals, employer-provided meals, and entertainment expenses under IRC §274, empowering you to advise your clients with confidence.
Understanding these business meal and entertainment deduction rules are critical for minimizing tax liability and ensuring compliance. We’ll outline the key limitations, exceptions, and recent changes so you can apply them accurately to your clients’ situations.
Navigating federal tax law is a constant challenge for tax professionals, and staying current is key to effective corporate tax planning.
[Download our exclusive One Big Beautiful Bill Act (OBBBA) roadmap for an overview of the many tax law changes.]
What are the business entertainment expenses & meals deductions under IRC §274?
IRC §274 limits food and beverage expense deductions and generally disallows entertainment expense deductions. Deductible food and beverage expenses are subject to a 50% limitation, while entertainment expenses are nondeductible, unless an exception applies.
What are the rules for employer-provided meals?
Under §274(o), added by the OBBBA, no deduction is allowed for expenses paid or incurred after 2025 with respect to:
- Meals furnished to employees that are excludable under §119(a) (meals furnished for the convenience of the employer); and
- Food and beverage expenses for an employer-operated facility (defined in §132(e)(2)).
However, §274(o) does not apply to expenses described in §274(e)(8) (entertainment sold to customers) or §274(n)(2)(C) (meals provided on certain commercial vessels, certain oil and gas platforms and drilling rigs and at related support camps, and certain fishing vessels or at certain fish-processing facilities).
What is the 50% limit on business meal deductions?
Section 274(n)(2)(C) allows taxpayers to deduct 50% of otherwise allowable ordinary and necessary food and beverage expenses paid or incurred in carrying on a trade or business.
Certain food and beverage expense categories, however, are not subject to the §274(n)(2)(C) 50% limitation, including:
- Meals required by federal law to be provided to commercial vessel crew members.
- Meals provided to commercial vessel crew members operating on the Great Lakes, Saint Lawrence Seaway, or any U.S. inland waterway to the extent the vessel would be required by federal law to provide food and beverages to crew members if it were operated at sea.
- Meals provided on offshore oil or gas platforms and drilling rigs.
- Meals provided on oil or gas platforms and drilling rigs and at support camps in proximity and integral to such a platform or rig, if the platform or rig is in the U.S. north of 54 degrees north latitude.
- Meals provided on fishing vessels, fish-processing vessels, or fish-tender vessels (defined in 46 U.S.C. §2101), or at fish-processing facilities located in the U.S. north of 50 degrees latitude but not in a metropolitan statistical area (defined in §143(k)(2)(B)).
Overview of meals and entertainment deductions under new law
Are entertainment expenses deductible?
No deduction is allowed for expenses with respect to entertainment, amusement, or recreation activities (or facilities used in connection with such activities), unless a §274(e) exception applies.
What are the exceptions for non-deductible entertainment?
While the general rule is strict, §274(e) provides several critical exceptions where entertainment-related expenses remain deductible. These exceptions include:
- Expenses for recreational, social, and similar activities primarily for the benefit of the taxpayer’s employees (§274(e)(4)).
- Expenses directly related to business meetings of the taxpayer’s employees, stockholders, agents, or directors (§274(e)(5)).
- Expenses for goods and services sold by the taxpayer to customers in a bona fide transaction for adequate and full consideration in money or money’s worth (§274(e)(8)).
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